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Increase in SEC Actions against Public Company–Related Defendants Outpaces Growth in Overall Enforcement Actions

Defendant cooperation rises with Commission’s use of administrative proceedings

Henry Kaufman Management Center

The SEC noted cooperation more frequently in administrative proceedings than civil actions, a disparity that has increased noticeably over the last three fiscal years.

U.S. Securities and Exchange Commission (SEC) actions against public companies or their subsidiaries (public company–related defendants) outpaced the overall growth in enforcements over the last four fiscal years. SEC actions targeting these defendants in FY 2016 increased 130 percent from FY 2013, compared to a 61 percent increase in all independent or stand-alone enforcement actions.

A report issued today by the NYU Pollack Center for Law & Business and Cornerstone Research, based on data from their collaboration on the Securities Enforcement Empirical Database (SEED), also looks at cooperation by public company–related defendants in settlement negotiations, as noted by the SEC.

“Public company–related defendants cooperated in 55 percent of settlements with the SEC in fiscal year 2016,” said Stephen Choi, the Murray and Kathleen Bring Professor of Law at the NYU School of Law and director of the Pollack Center. “The SEC noted cooperation more frequently in administrative proceedings than civil actions, a disparity that has increased noticeably over the last three fiscal years.”

SEC actions against public company–related defendants continued their upward trajectory in FY 2016, totaling 92 independent actions.

“Issuer reporting, FCPA violations, and investment advisors remained a key focus of SEC allegations,” said Dr. David Marcus, a senior vice president of Cornerstone Research. “The SEC initiated more cases against public investment advisors and companies than ever before. The number of these actions against public company–related defendants in FY 2016 surpassed the combined total for the previous three fiscal years.”

“With yesterday’s announcement that Mary Jo White will step down from her role as SEC chair when President Obama leaves office in January, it will be interesting to see what impact, if any, the appointment of a new chair by the Trump administration will have on SEC enforcement,” Professor. Choi said. “While it is not prudent to speculate on the exact impact at this time, much will depend on the new appointee’s priorities and policies. The trends we see in the next two years of SEED data will help to tell that story.”

Download Report
SEC Enforcement Activity against Public Companies and Their Subsidiaries: Fiscal Year 2016 Update

  • Public company–related actions increased from 84 cases in FY 2015 to 92 cases in FY 2016, the highest number since 2010, the first year tracked in SEED.
  • The percentage of SEC settlements with public company–related defendants that noted cooperation more than doubled from FY 2010 to FY 2016.
  • Issuer Reporting and Disclosure was the most common allegation in FY 2016, accounting for 26 percent of public company–related actions.
  • In FY 2016, 97 percent of public company–related defendants settled SEC enforcements concurrently with the filing of the action.
  • Between FY 2010 and FY 2016, the top 10 monetary settlements imposed in public company–related actions totaled over $3.4 billion. Eight of the top 10 settlements involved financial institutions.
About the Securities Enforcement Empirical Database (SEED)
The Securities Enforcement Empirical Database (SEED) tracks and records information for SEC enforcement actions filed against public companies traded on major U.S. exchanges and their subsidiaries. Created by the NYU Pollack Center for Law & Business in cooperation with Cornerstone Research, SEED facilitates the analysis and reporting of SEC enforcement actions through regular updates of new filings and settlement information for ongoing enforcement actions. The variables tracked include defendant names and types, violations, venues, and resolutions. 

About the NYU Pollack Center for Law & Business
Established in 1997, the NYU Pollack Center for Law & Business is a unique shared venture between the New York University School of Law and the Leonard N. Stern School of Business. The center is designed to enrich the professional education of students of law and business; to facilitate joint teaching in the field; and to involve leaders in banking, business, and law in the intellectual life of the University. The center does this through sponsorship of meetings, conferences, and dinners.
About Cornerstone Research
Cornerstone Research provides economic and financial consulting and expert testimony in all phases of complex litigation and regulatory proceedings. The firm works with an extensive network of prominent faculty and industry practitioners to identify the best-qualified expert for each assignment. Cornerstone Research has earned a reputation for consistent high quality and effectiveness by delivering rigorous, state-of-the-art analysis for over 25 years. The firm has 600 staff and offices in Boston, Chicago, London, Los Angeles, New York, San Francisco, Silicon Valley, and Washington.